a.Estimate the arc income elasticity of demand using the 2006 and 2007 data.a.As

a.Estimate the arc income elasticity
of demand using the 2006 and 2007 data.a.Assume that these estimates are
expected to remain stable during 2008. Forecast 2008 sales for Reliable
assuming that its aircraft prices remain constant at 2007 levels and that
disposable personal income will increase by $40 billion. Also assume that arc
income elasticity computed in (b) above is the best available estimate of
income elasticity.b.Forecast 2008 sales for Reliable
given that its aircraft prices will increase by $500 from 2007 levels and that
disposable personal income will increase by $40 billion. Assume that the price
and income effects are independent and additive and that the arc income and
price elasticities computed in parts (a) and (b) are the best available
estimates of these elasticities to be used in making the forecast.